Nasdaq tightens vise on NYSE, but questions remain

Nasdaq OMX Group and IntercontinentalExchange Inc will take their takeover bid for NYSE Euronext straight to the Big Board's shareholders as they try to corner the company into talks.

Nasdaq and ICE said on Monday that they will launch a tender offer for NYSE's shares later this month. The move comes after NYSE's board twice rejected the $11 billion unsolicited offer in favor of its existing $10.2 billion deal with Deutsche Boerse.

Nasdaq and ICE's move to go hostile could force NYSE to the negotiating table or to fight back with defensive measures if shareholders step up pressure. It could also pressure Deutsche Boerse into sweetening its deal.

But it is unlikely to be the final word in what may be a lengthy takeover battle.

NYSE could still sit tight. The gap between Nasdaq-ICE and Deutsche Boerse bids -- a key shareholder concern -- has narrowed to 8 percent from nearly 20 percent in the last few weeks, thanks in part to a weaker U.S. dollar.

The Nasdaq-ICE exchange offer will also have conditions that could yet derail it.

We believe the laundry list of conditions attached to the offer virtually guarantee that it will never be executed, said Patrick O'Shaughnessy, an analyst at Raymond James.

The conditions to the tender offer essentially state that Nasdaq/ICE's proposal must first be approved by the NYSE board, so this offer does not seem to be hostile at all.

Shareholders of the New York Stock Exchange parent have nonetheless urged it to at least talk to Nasdaq and ICE about their deal.

I am bothered that NYSE has avoided any conversation with Nasdaq. I feel as if they are biased to the Deutsche offer even though economically it's not equal, said Keith Wirtz, chief investment officer at Fifth Third Asset Management, which holds more than 100,000 shares of NYSE Euronext.

The proposals on the table are not likely to be the last, Wirtz said. I really think the German company is going to be forced to react to the actions of Nasdaq.

A QUESTION OF INTENTIONS

So far, NYSE has adopted a just say no defense to Nasdaq and ICE's overtures, and Deutsche Boerse has shown no intention of changing its deal.

Nasdaq and ICE want to split NYSE Euronext's operations between them, and have said theirs is a superior deal for shareholders, who will ultimately have to decide.

NYSE's board has argued that the unsolicited bid is not serious, it risks being blocked by antitrust regulators and runs contrary to the company strategy of diversifying internationally.

The commencement of this exchange offer should convince the NYSE Euronext board of the seriousness of our intentions, Nasdaq Chief Executive Robert Greifeld said on Monday in a statement that announced that the boards of Nasdaq and ICE approved the plan.

Later on Monday, NYSE Euronext acknowledged the planned tender offer and noted that Nasdaq and ICE did not adjust their bid.

Deutsche Boerse said it remained committed to its agreed merger deal with NYSE.

Deutsche Boerse believes the proposal by Nasdaq and ICE would burden shareholders with irresponsible leverage, eliminate a competitor and face insurmountable antitrust risk, it said.

CONDITIONAL OFFER

Nasdaq, which runs stock and options markets in the United States and Nordic European countries, and ICE, an energy futures specialist based in Atlanta, said their offer would be detailed in a regulatory prospectus to be filed this month.

The pair listed seven conditions that could complicate the tender offer. These conditions include the need for NYSE Euronext's board to waive a rule that limits individual ownership to 20 percent of shares and to 10 percent of the vote.

Other conditions include NYSE terminating its merger agreement with Deutsche Boerse and the NYSE board approving the Nasdaq/ICE offer.

NYSE shareholders are scheduled to vote July 7 on the Deutsche Boerse plan, which was unveiled in February.

The deal, which would create the world's largest exchange operator, capped a wave of merger plans among many of the world's top exchanges.

NYSE Euronext shares ended 0.9 percent higher at $40.40, Nasdaq shares closed up 2 cents at $27.14, and ICE fell 1.8 percent to $118.20. Shares of Deutsche Boerse -- the largest of the four -- closed up 0.4 percent at 56.32 euros on Monday.